Abstract
Estimating the lifetime wealth consequences of homeownership is complicated by ongoing events, such as divorce or inheritance, that may shape both homeownership decisions and later-life wealth. We argue that prior research that has not accounted for these dynamic selection processes has overstated the causal effect of homeownership on wealth. Using NLSY79 data and marginal structural models, we find that each additional year of homeownership increases midlife wealth in 2008 by about $6,800, more than 25 percent less than estimates from models that do not account for dynamic selection. Hispanic and African American wealth benefits from each homeownership year are 62 percent and 48 percent as large as those of whites, respectively. Homeownership remains wealth-enhancing in 2012, but shows smaller returns. Our results confirm homeownership’s role in wealth accumulation and that variation in both homeownership rates and the wealth benefits of homeownership contribute to racial and ethnic disparities in midlife wealth holdings.
- Copyright © 2016 by Russell Sage Foundation. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Reproduction by the United States Government in whole or in part is permitted for any purpose. This research was supported in part by an Emerging Scholars Small Grant from the University of Wisconsin Institute for Research on Poverty. An earlier version of this paper was presented at the 2015 annual meeting of the Population Association of America. We are grateful to Fangsheng Zhu for research assistance and to Vanesa Estrada-Correa, Fabian Pfeffer, Bob Schoeni, and anonymous reviewers for helpful comments. Direct correspondence to: Alexandra Killewald at killewald{at}fas.harvard.edu, 436 William James Hall, Harvard University, 33 Kirkland St., Cambridge, MA 02138; and Brielle Bryan at briellebryan{at}g.harvard.edu, 432 William James Hall, Harvard University, 33 Kirkland St., Cambridge, MA 02138.
Open Access Policy: RSF: The Russell Sage Foundation Journal of the Social Sciences is an open access journal. This article is published under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.
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